Global Markets Report - 23 November
Australian shares are set to open higher.
Australia
Australian shares are set to open higher after US stocks edged higher Tuesday in thin preholiday trading, with investors focused on the path of the Federal Reserve's interest-rate increases.
ASX futures were up 46 points or 0.6% at 7239 as of 7:00am on Wednesday, pointing to a green open.
The S&P 500 edged up 0.8%, after dropping 0.4% in the previous session. The Dow Jones Industrial Average gained 0.8%, and the Nasdaq Composite added 0.5%.
Many traders were away from their desks ahead of the Thanksgiving holiday. Fewer shares listed on the New York Stock Exchange and Nasdaq traded Monday than on any day since Aug. 29, according to Dow Jones Market Data. It was the sixth-lowest day by trading volume of the year.
Still, there is still much for investors to consider as they try to chart the market's trajectory. Rising Covid-19 cases in China have raised concerns among money managers about growth in the world's second-largest economy just weeks after the prospect of eased restrictions propelled stocks and commodities higher globally.
In commodity markets, Brent crude oil jumped 1.2% to $US88.48 a barrel, gold was nearly flat at US$1,737.36.
In local bond markets, the yield on Australian 2 Year government bonds rose to 3.12% while the 10 Year was up to 3.59%. Overseas, the yield on 2 Year US Treasury notes rose to 4.51% and the yield on the 10 Year US Treasury notes was down at 3.75%.
The Australian dollar hit 66.42 US cents down from the previous close of 66.04. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 99.98.
Asia
China stocks ended mixed, slightly picking up from a recent downturn amid deteriorating Covid outbreaks and tightened movement curbs across several major cities. The benchmark Shanghai Composite Index, the only gainer among the major indexes, edged up 0.1% to settle at 3088.94. The Shenzhen Composite Index lost 1.3% to 2002.39, while the ChiNext Price Index was down 1.8% at 2343.55. Property developers and construction companies were among the best performers after top Beijing officials reiterated support for the embattled sector. Tourism-related companies, including travel agencies and attraction site operators, offset the momentum as the sector continued to weaken.
Hong Kong's Hang Seng Index ended 1.3% lower at 17424.41, extending a losing streak to a fifth session, amid mounting Covid-19 cases in China, including in key economic hubs Beijing and Guangzhou. Consumer-related sectors and internet-platform companies bore the brunt of the selloff, with Meituan skidding 8.3%, Haidilao declining 5.2% and Alibaba Group 4.0% lower. Baidu dropped 2.0% and Kuaishou slid 6.3% ahead of their quarterly results. The latest supportive signal from Beijing initially drove property stocks higher, but the rally fizzled, with Country Garden Holdings finishing among the top laggards, down 6.0%. Telecom-services providers outperformed the market. China Unicom topped gainers with a 6.8% rise and China Telecom added 2.8% after releasing October operational data.
Japan's Nikkei Stock Average rose 0.6% to close at 28115.74 amid yen weakness that benefits export-oriented companies. USD/JPY is still in the upper-141 handle, which has supported equities, Stephen Innes, managing partner at SPI Asset Management, says in an email. Gains on the index were broad-based, with Panasonic climbing 3.3% after Nikkei reported that the electronics company plans to roll out a pet robot in a shift away from home appliances.
Europe
European stocks advance as rising oil prices help investors shrug off UK economic concerns.
The pan-European Stoxx Europe 600 gained 0.7%, the English FTSE 100 is up 1% and the French CAC 40 and German DAX advanced about 0.3%, boosted by oil stocks as Brent crude increases 2.2% to $89.35 a barrel.
"The Organisation for Economic Co-operation & Development warning that the UK faces years of stagnant growth has done little to dampen sentiment for the FTSE 100, with energy stocks leading the push higher," IG analyst Joshua Mahony wrote. "While the Covid pandemic has largely masked the effects of Brexit, the outlook remains bleak over [the UK's] ability to grow its way out of this crisis.".
North America
US stocks edged higher Tuesday in thin preholiday trading, with investors focused on the path of the Federal Reserve's interest-rate increases. The S&P 500 edged up 0.8%, after dropping 0.4% in the previous session. The Dow Jones Industrial Average gained 0.8%, and the Nasdaq Composite added 0.5%.
Many traders were away from their desks ahead of the Thanksgiving holiday. Fewer shares listed on the New York Stock Exchange and Nasdaq traded Monday than on any day since Aug. 29, according to Dow Jones Market Data. It was the sixth-lowest day by trading volume of the year.
Still, there is still much for investors to consider as they try to chart the market's trajectory. Rising Covid-19 cases in China have raised concerns among money managers about growth in the world's second-largest economy just weeks after the prospect of eased restrictions propelled stocks and commodities higher globally.
"The more negative tone out of China yesterday has only added to existing fears about a US recession over the coming months," said Deutsche Bank strategist Jim Reid in a note.
Traders, meanwhile, are grappling with an uncertain outlook for interest rates in the US The Fed has been aggressively raising interest rates this year to tame inflation, rattling everything from stocks to bonds to home sales. In 2023, investors largely expect the Fed to pause its rate-hiking cycle to allow the economy to absorb the effects of monetary tightening.
Cleveland Fed President Loretta Mester said Tuesday she and her colleagues are focused on tackling inflation. Analysts broadly expect the Fed to slow the increases to half a percentage point at its December meeting, down from a series of three-quarter-point increases.
Goldman Sachs said in a report Tuesday that it expects the S&P 500 to finish next year at 4000 points, which would be about 50 points than Monday's levels. Higher interest rates have left very few places for investors to hide this year. Some investors, however, believe next year could be a stock pickers market.
"It's more of a rational, fundamental approach, away from growth stocks, " said Eric Hale, founder of Trader Oasis, a trading platform for retail traders specializing in stocks and options. He estimates the S&P 500 will trade around 4200 at the end of the year.
Among individual stocks, Best Buy gained 11%, the best performer in the S&P 500. The electronics retailer reported quarterly results that beat expectations and raised its outlook.